Q3 GDP

by Larry Levin

Today I bring you a quick piece from "Breakfast With Dave." Analyst Dave Rosenberg from Gluskin Sheff believes Q3 data will come in with a negative reading and economists saying that the recession never ended.

Our suspicions have been confirmed — the recession never ended. Macroeconomic Advisers produces a monthly U.S. real GDP series and it shows that the peak was in April, as we expected, with both May and June down 0.4% in the worst back-to-back performance since the economy was crying Uncle! back in the depths of despair in September-October 2008.

The quarterly data show that Q2 stands at a +1.1% annual rate (so look for a steep downward revision for last quarter) and the “build in” for Q3 is -1.5% at an annual rate. Depending on the data flow through the July-September period, it looks like we could see a -0.5% to -1% annualized pace for the current quarter. Most economists have cut their forecasts but are still in a +2.5% to +3.5% range. What is truly amazing is that despite all the fiscal, monetary, and bailout stimulus, the level of real economy activity, as per the M.A. monthly data, is still 2.5% below the prior peak. To put this fact into context, the entire peak to trough contraction in the 2001 recession was 1.3%! That is incredible.

Interestingly, and dovetailing nicely with our deflation theme, nominal GDP fell 0.3% in May and by 0.4% in June. This is a key reason why Treasury yields are melting.



Previous Day's Trading Room Results:

Trade Date: 8/23/10

E-Mini S&P Trades*
(before fees and commissions):


1) FT buy @ 1:27pm at 1072.00 = b/e (1)

2) Algorithm positions (1)

3) “Reading the Tape” positions (0)…combined Secret’s, Algo, & “Reading the Tape” total… -1.25



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